THE U.S. GOVERNMENTAL ACCOUNTING STANDARDS Board (GASB) has issued a new statement aimed at improving financial reporting for government entities by amending the requirements of Statements No. 14, The Financial Reporting Entity, and No. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments, to better meet user needs and address reporting entity issues that have come to light since those statements were issued in 1991 and 1999, respectively.
Statement No. 61, The Financial Reporting Entity: Omnibus, amends these two statements to improve the information presented about a financial reporting entity that is made up of primary government and component units. An entity is considered a component unit if it is financially dependent on the primary government, if financial statements would be misleading if data from the component unit were not included, or if the primary government appoints the voting majority of the board of the component unit and is able to impose its will. Examples include universities, public authorities, and mass transit systems.
Statement No. 61 modifies certain requirements for inclusion of component units in the financial reporting entity, amends criteria for reporting component units as though they were part of the primary government (i.e., blending) in certain circumstances, and clarifies the reporting of equity interests in legally separate organizations. "The financial reporting entity changes included in Statement No. 61 will allow the public to assess accountability better by ensuring that a government's financial statements include all of the appropriate component organizations," says...